katieinny

Austin: So, do you think TIAA-CREF would set up a 401(k) plan where the employer has no control over transferring the assets? I have no idea what the 5500s look like at this point. I'll cross that bridge when I come to it -- if I come to it. Maybe SFSD is right and this will be a bigger headache than I can handle.

I suppose anything's possible at this point, but the plan was transferred from a more traditional 401(k) type investment firm several years ago, so I bet back then there was a trustee. That might have changed when it got to the current annuity provider. The employer might not have understood what was happening at the time. If that's the case, you might be right, Austin.

SFSD: Yes, I would like to see all the documents involved, but I'm waiting for confirmation that our firm will be retained to handle this matter. What I'm worried about is that whatever paperwork was completed years ago, when this plan was initially transferred to this provider, was filled out incorrectly. Things were hunky-dory while the status quo was maintained. Now the applecart has been upset and the sky is falling.

David: Are you saying that the only way out of this is to terminate the plan? One of the problems with that is that they would not be able to set up another plan with another investment firm for 12 months. This provider is so used to the way 403(b)s operate that the concept of a governing plan document seems foreign to them. The provider's rep said that ERISA can't require them to violate the terms of the contract they have with the employee. And the rep goes on to say that the employer's fiduciary responsibility does not give the ".....fiduciary extra-legal powers, such as the power to void valid and otherwise enforceable contracts." Then the rep goes on to discuss contract law. Good Grief.

Thank you, K2retire. So far, this provider is insisting that the contract language is the only thing that governs how the assets are handled. Their position is that the employer has no right to infringe on the contract between the provider and the plan participant. The statement I read today says "The employer is granted no ownership rights in the vested accumulations. Therefore, the employer cannot mandate the transfer of accumulations to other investments whether inside or outside of the certificate." This is crazy!!

We haven't been asked to take on this case yet, but I want to be ready if anything comes of it. A not-for-profit has a 401(k) plan (I specifically asked if the caller meant 403(b) and was assured that we're talking about a 401(k) plan) that is apparently invested in individual annuity contracts for the employer's nearly 1000 participants. The employer wants to move the plan to another investment firm. The current provider (and holder of these annuity contracts) says that each participant must agree to the transfer because each person has his or her own contract. I was flabbergasted when I heard that. Could that be true?

Peter: After reading half the afternoon away, I finally got to the same place you sent me. Wish I had waited for your answer and saved myself a lot of time! But confirmation is nice, too, so thank you very much. I'm right about the PBGC coverage aren't I -- only applies if they are an ERISA plan?

Thank you, David. I have been reading articles about the 2005 Bankruptcy Act that seem to say that plan assets are protected from creditors even if the plan is not covered by ERISA. So now I'm more confused than I was before. What am I missing here?

We don't do much with either DBs or church plans, so I'm really out of my element here. I don't believe that participants under a non-electing DB church plan would be protected from creditors because they aren't under ERISA. But just because it seems logical to me doesn't make it so. I also found an earlier link that said a church plan isn't covered by the PBGC either. Is that true whether or not they chose to be an ERISA plan, or would an ERISA church plan be required to pay PBGC premiums? Your help is appreciated.

A small medical practice that includes only HCEs set up an HRA. Prior to the HRA they had been using HSAs. One of the partners says he would rather keep his HSA and either not particpate in the HRA, or perhaps do both if he must participate in the HRA. He likes using the debit card that comes with the HSA. I thought I heard that the use of debit cards was going to be temporarily unavailable until they figure out how to overcome the problem with needing an Rx for over-the-counter drugs. Can this partner continue to march to a different drum, or must he conform and go with the HRA only?

For the most part, except in the case of terminated participants, the 403(b) assets have remained in the plan, at the same 3 brokerage firms that were in place years ago. The agency is trying to terminate the plan so that the remaining 2 participants (still working for the agency) can roll the assets over to IRAs. If the full service firms that acted as custodians prior to 2009 have discontinued that practice, who does that leave as a custodian to sign under the new written document requirement? They are willing to do what needs to be done, which includes showing the IRS that they have adopted a plan now, but can they do it without getting anyone to sign as custodian?

A small 501©(3) with only a couple of participants in the plan has asked us to help them get a written plan document in place (yes, we know it's late). The assets are invested in mutual funds at a couple of well known, big investment firms. When it comes to naming them as custodians under the plan and getting them to sign, they say they are not a custodian or trustee. They just hold the assets. Must the plan have a custodian or trustee?

Well, Peanut Butter Man, there it is in a nutshell. I think the working copy option would be the way to go at this point. Thanks for setting me straight.

I plan on submitting an IDP 401(k) for a cycle E filer in January. The plan was restated in 2009, but there are several amendments that will be attached, including the Roth feature, 415, final 401(k) and (m), PPA/HEART and something else that I can't remember. Is there any reason to restate the plan again to incorporate those amendments within the document, or can those amendments simply be attached?

The not-for-profit agency is willing to pay interest on late deposits, but I can't believe that they would be expected to go back more than 3 years to correct the problem. I suppose we could include only 2009 and 2010 in our VFCP filing and see if the DOL asks for more. The actual time period could go back to the beginning of the plan (20 years or so). I'm sure this has come up a zillion times. I would be interested to hear how others have handled this.

Thanks recline46. That makes perfect sense. It will take what seems like forever to get it done, but the results will be far more accurate than my too simplistic proposal.

I'm not having much luck getting answers to my 403(b) questions, but here's another one just in case somebody takes pity on me. The plan document says that the ER can contribute any amount necessary to correct a violation under EPCRS or the VFCP. But I don't see a reference in either the document or the VFCP material that says how the earnings should be allocated. I'm talking about earnings over several months, so the only method that makes sense to me is to allocate the amount pro-rata based on the participant account balances. But I would be interested in hearing the thoughts of others who are far more familiar with these matters than I am.

I am assisting our client with an application under the VFCP to correct several months of late EE deferrals under their 403(b) plan. The lost interest has been calculated by using the VFCP calculator and now I'm moving on to the Form 5330. I was caught off guard when I read the instructions under Schedule C, Tax on Prohibited Transactions, because I don't see reference to a 403(b) plan under the description of what the term "plan" means. Perhaps they don't have to file a 5330?

I've been doing some reading about 403(b) participation when a not-for-profit agency has a for-profit subsidiary. In this case, the 501©(3) does not want to include the employees of the new for-profit LLC in the 403(b) plan. The easy answer is to say that since the LLC is not a 501©(3) organization, those employees can be ignored for 403(b) purposes. Could it be that easy? One reason I'm concerned is that the 501©(3) expects to add more for-profit businesses over the next few years, so I want to cross this bridge now rather than waiting until there's a bigger problem involving even more people.

Yes, I did find that section in Natalie Choate's book. I was hoping that there might be something other than private letter rulings for the client to rely on since that edition was published. Apparently, the IRA custodian is telling the client that the account must go to the estate. We're working on it.....

IRA holder dies without naming a beneficiary under his IRA. The spouse is the sole beneficiary of the estate and the executor. There are a bunch of private letter rulings that say the spouse can roll the money into his/her own IRA, but has the IRS ever come out with a public ruling on this matter? This happens so often, that you'd think the IRS would have made some public comments about this issue.

I've been reading about the issues relating to terminating a non-ERISA 403(b) with individual custodial accounts (little or no ER involvement). The plan we're working with now has only a handful of current employees who are willing to liquidate their accounts and roll the assets over to IRAs. So far, so good. However, we were just told that there are a couple of former employees who left several years ago. Nobody knows what happened to their accounts. I'm afraid that I now have to tell the Director that the plan can't be terminated unless we can track down those former employees. Am I right about that?

A small employer pays for health insurance for several of his employees. Most only need single coverage, but one employee needs to have family coverage. He might not want to pay for family coverage for everybody though when the time comes. I think the employer can purchase health insurance for some, but not all, of his employees, and I think he can pay for the extra coverage in the case of the employee who needs a family plan without being in trouble for discrimination. But then I started wondering if any of that changed under Health Care Reform. I'm not talking about a welfare benefit type plan -- just an employer who's willing to purchase health insurance for some of his employees. I would appreciate your comments.

A group of companies with 401(k) plans was probably a controlled group. We were trying to get ownership percentages so we could get them on the right track, but in the meantime some stock was bought or sold, and as a result they are no longer a controlled group. Now I'm trying to figure out how to treat them for 2010. It doesn't make sense to go through hoops to make them comply with the controlled group rules for 6 months, or whenever the transaction took place. What happens when controlled group status goes away part way through the year?

The client is under Cycle E, so I'm getting ready to submit the ESOP. I'm thinking I probably need to get his individually designed DB plan submitted again, too. Is that right, or do I have more time for that one?